- As I mentioned before a lot, the performance of the USD/JPY currency pair will be greatly affected by the course of the policy of global central banks.
- The US Federal Reserve is leading a violent tightening policy followed by the rest of the global banks to contain the global inflation standard, and in return, the Bank of Japan is still following a policy of single negative interest.
- Since the start of trading this week, the price of the USD/JPY currency pair is in a range between 141.52 and 143.50 and is settling around 143.20 at the time of writing the analysis.
All in all summer trading this year is as slow as it can be. In fact, the volatility of the forex market in 2023 was remarkably low. However, this does not mean that they will remain the same in the remaining months until the end of the trading year. After all, just four months ago, in March, the financial world was seriously concerned about the regional banking system of the United States.
Investors were so concerned that they sold USD/JPY (meaning it is a pioneer for the stability of financial markets) from 137 to below 130 - a staggering drop of seven big figures. However, as it turned out, the so-called “crisis” was nothing more than an opportunity for traders to load more USD/JPY long positions. The currency pair is now trading above 142, in the middle of an important range for technical traders.
Before looking at the technical perspective, let's show what Japanese inflation looks like now. In short, it is well above the Bank of Japan (BOJ) target. Everyone should focus on the new core consumer price index - a measure that excludes energy as well as fresh food. The data indicates that inflation in Japan is the highest in the past two decades, and there are few or no signs of a meaningful reversal.
USD/JPY Technical Outlook
The technical picture is complex for at least two reasons. Firstly, this is the daily time frame, which means that time is essential for a meaningful breakout. Right now, the market is in the middle of a critical range - off 133, off 152. In other words, it could go both ways. The USD/JPY is expected to headfirst to resistance 152 and then to support 132 after that. However, he may do so in one month, a quarter, or even twelve months. In the meantime, it can return to the vicinity of 138 or 135 levels before bouncing back higher.
In short, it is not surprising that USD/JPY is in the middle of a critical range during the summer trading months. And by the end of September, it will be clear to everyone where USD/JPY will go next. It is expected that it will reach resistance 152 first, then support 132, but for now, there is a need for patience and waiting. This week, US inflation figures will have a reaction to the future of the US Federal Reserve's policy, and therefore to all US dollar pairs, without exception.
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